What Is an Appraisal?

Their home's purchase is the largest transaction many of us may ever make. Whether it's a main residence, a seasonal vacation home or a rental fixer upper, the purchase of real property is a detailed financial transaction that requires multiple parties to pull it all off.

You're probably familiar with the parties taking part in the transaction. The real estate agent is the most known entity in the transaction. Then, the mortgage company provides the money necessary to fund the transaction. And ensuring all details of the transaction are completed and that the title is clear to transfer to the buyer from the seller is the title company.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, who's responsible for making sure the value of the real estate is in line with the purchase price? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Frank L. Hagan Appraisals Inc will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first responsibility at Frank L. Hagan Appraisals Inc is to inspect the property to ascertain its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly exist and are in the shape a typical person would expect them to be. To ensure the stated size of the property has not been misrepresented and illustrate the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the property.

Back at the office, an appraiser uses two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

Here, we pull information on local construction costs, the cost of labor and other elements to calculate how much it would cost to construct a property similar to the one being appraised. This value commonly sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Paired Sales Analysis

Appraisers get to know the subdivisions in which they work. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the home being appraised. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject.

  • Say, for example, the comparable has a fireplace and the subject doesn't, the appraiser may deduct the value of a fireplace from the sales price of the comparable.
  • If the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Frank L. Hagan Appraisals Inc, we are an authority when it comes to knowing the value of real estate features in PITTSBORO and Hendricks County neighborhoods. The sales comparison approach to value is typically given the most importance when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this situation, the amount of revenue the property produces is factored in with income produced by nearby properties to determine the current value.

Arriving at a Value Conclusion

Analyzing the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. Depending on the individual circumstances of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.Regardless, the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Frank L. Hagan Appraisals Inc will guarantee you attain the most accurate property value, so you can make the most informed real estate decisions.